Correlation Between IShares MSCI and Invesco NASDAQ
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Invesco NASDAQ at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares MSCI and Invesco NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI USA and Invesco NASDAQ 100, you can compare the effects of market volatilities on IShares MSCI and Invesco NASDAQ and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares MSCI with a short position of Invesco NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Invesco NASDAQ.
Diversification Opportunities for IShares MSCI and Invesco NASDAQ
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Invesco NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ 100 and IShares MSCI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares MSCI USA are associated (or correlated) with Invesco NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ 100 has no effect on the direction of IShares MSCI i.e., IShares MSCI and Invesco NASDAQ go up and down completely randomly.
Pair Corralation between IShares MSCI and Invesco NASDAQ
Given the investment horizon of 90 days iShares MSCI USA is expected to generate 0.8 times more return on investment than Invesco NASDAQ. However, iShares MSCI USA is 1.25 times less risky than Invesco NASDAQ. It trades about 0.22 of its potential returns per unit of risk. Invesco NASDAQ 100 is currently generating about 0.05 per unit of risk. If you would invest 20,631 in iShares MSCI USA on August 30, 2024 and sell it today you would earn a total of 894.00 from holding iShares MSCI USA or generate 4.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI USA vs. Invesco NASDAQ 100
Performance |
| Timeline |
| iShares MSCI USA |
| Invesco NASDAQ 100 |
IShares MSCI and Invesco NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Invesco NASDAQ
The main advantage of trading using opposite IShares MSCI and Invesco NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Invesco NASDAQ can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Invesco NASDAQ will offset losses from the drop in Invesco NASDAQ's long position.| IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares Expanded Tech Software |
| Invesco NASDAQ vs. Invesco NASDAQ Next | Invesco NASDAQ vs. SPDR Portfolio SP | Invesco NASDAQ vs. SPDR Portfolio SP | Invesco NASDAQ vs. Schwab Dividend Equity |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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